08-30 726

Citation Nr: 1008492 Decision Date: 03/08/10 Archive Date: 03/17/10 DOCKET NO. 08-30 726 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Atlanta, Georgia THE ISSUE Whether a debt resulting from the overpayment of compensation benefits in the original calculated amount of $363 was properly created. REPRESENTATION Appellant represented by: Georgia Department of Veterans Services ATTORNEY FOR THE BOARD Paul S. Rubin, Counsel INTRODUCTION The Veteran served on active duty from September 1965 to September 1985. This matter comes before the Board of Veterans' Appeals (Board) on appeal from an October 2006 decision by the Department of Veterans Affairs (VA) Regional Office (RO) in Atlanta, Georgia. FINDINGS OF FACT 1. The Veteran has been charged with an overpayment of VA compensation of $363, representing the excessive amount he received in compensation benefits for the time period between December 1, 2005 and October 31, 2006. 2. The overpayment of $363 was solely the result of VA administrative error; the Veteran's actions nor his failure to act did not contribute to the creation of the debt. CONCLUSION OF LAW The overpayment of compensation benefits in the amount of $363 was based solely upon VA administrative error, such that the debt was not valid and the overpayment was not properly created. 38 U.S.C.A. §§ 1114 (a), 5112, 5302, 5313 (West 2002 & Supp. 2009); 38 C.F.R. §§ 1.911 (c)(1), 1.956, 1.962, 3.500, 3.665 (2009). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), codified at 38 U.S.C.A. §§ 5100 , 5102-5103A, 5106, 5107, 5126 (West 2002 & Supp. 2009), imposes obligations on VA in terms of its duties to notify and assist claimants. But the VCAA is not applicable to claims for waiver of recovery of overpayment. Barger v. Principi, 16 Vet. App. 132, 138 (2002). See also Lueras v. Principi, 18 Vet. App. 435 (2004) (the VCAA does not apply to a waiver). Thus, any discussion as to VCAA compliance is not required. In any event, since the Board is granting the claim, there is no need to discuss in detail whether there has been compliance with the notice and duty to assist provisions of the VCAA because even if, for the sake of argument, there has not been, this is inconsequential and, therefore, at most harmless error. See 38 C.F.R. § 20.1102 . Governing Law and Regulations for Validity of the Debt An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C.A. § 5302 ; 38 C.F.R. § 1.962 . An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation (DIC), educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. 38 C.F.R. § 1.956 (a). "Compensation" means a monthly payment made by VA to a Veteran because of service-connected disability, or to a surviving spouse, child, or parent of a Veteran because of the service-connected death of the Veteran. 38 U.S.C.A. § 101 (13) (West 2002); 38 C.F.R. § 3.4 (2009). A Veteran who is incarcerated in a federal, state, or local penal institution in excess of 60 days for conviction of a felony committed after October 7, 1980, and who has a combined rating of 20 percent or more shall receive the rate of compensation of 10 percent payable beginning on the 61st day of incarceration. All or part of the compensation not paid to the Veteran may be apportioned to the Veteran's spouse, child, or children on the basis of individual need. 38 U.S.C.A. § 1114 (a), 5313 (West 2002 & Supp. 2009); 38 C.F.R. § 3.665 (2009). In short, these provisions create a limitation on payment of compensation to persons incarcerated for conviction of a felony. However, in such instances, VA must notify the Veteran that his benefits are subject to reduction due to his incarceration, of the rights of dependents to an apportionment while the person is incarcerated, and conditions under which payments to the person may be resumed upon release from incarceration. 38 C.F.R. § 3.665 (a). The preliminary issue of the validity of a debt is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. See 38 C.F.R. § 1.911 (c)(1) (2008); see also VAOPGCPREC 6-98. The propriety and amount of the overpayment at issue are matters that are integral to a waiver determination. See Schaper, 1 Vet. App. at 434 . In order for the Board to determine that the overpayment was not properly created, such that the debt was not valid, it must be established that the appellant was legally entitled to the benefits in question or, if the appellant was not legally entitled, then it must be shown that VA was solely responsible for the appellant being erroneously paid benefits. Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27757 (1990). Sole administrative error connotes that the appellant neither had knowledge of nor should have been aware of the erroneous award. Further, neither the appellant's actions nor his or her failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C.A. § 5112 (b) (9), (10) (West 2002 & Supp. 2009); 38 C.F.R. § 3.500 (b)(2) (2009); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments are erroneous. The United States Court of Appeals for Veterans Claims (Veterans Court) noted that, "[s]tated another way, when an overpayment has been made by reason of an erroneous award based solely on administrative error, the reduction of that award cannot be made retroactive to form an overpayment debt owed to VA from the recipient of the erroneous award." Erickson v. West, 13 Vet. App. 495, 499 (2000). In other words, if a debt is the result solely of administrative error, the effective date of the reduction of benefits is the date of the last payment based on this error and, consequently, there would be no overpayment charged to the Veteran for an overpayment attributable to administrative error. 38 U.S.C.A. § 5112 (b)(10); 38 C.F.R. § 3.500 (b). Analysis Effective May 19, 2004, the Veteran was in receipt of 60 percent disability compensation for his service-connected disabilities. But in an April 5, 2005 statement, the Veteran advised that the VA should stop his entitlement to compensation due to his incarceration for a March 30, 2005 conviction of a felony. The VA interpreted the conviction to mean that his incarceration began on March 30, 2005, such that a reduction in compensation benefits was made effective May 30, 2005 (the 61st day of his incarceration). In a July 2005 decision, his spouse was granted apportionment of benefits effective May 30, 2005. Subsequently, however, in an August 2008 Report of Contact, the Georgia Men's State Prison indicated that the Veteran's incarceration actually began on May 12, 2005, as opposed to March 30, 2005. Therefore, the reduction of benefits should have been made effective 61 days later on July 11, 2005, instead of May 30, 2005. The VA concluded in the September 2008 Statement of the Case (SOC) that withholding for the Veteran's incarceration began too early. In any event, the $363 debt on appeal does not arise out of the amount of compensation benefits withheld due to confusion regarding his correct incarceration date. Rather, it arises out of the latter payment of reduced compensation benefits from December 1, 2005 to October 31, 2006. In this regard, due to his incarceration, the VA initially paid the Veteran reduced compensation benefits in the amount of $108 a month starting on May 30, 2005. But due to a legislative change, the Veteran's monthly compensation benefits were increased to $145 a month from December 1, 2005 to October 31, 2006, for a total of $1,595. However, the VA determined that Veteran's monthly compensation benefits should only have been increased to $112 a month from December 1, 2005 to October 31, 2006, for a total of $1,232. See December 2008 written paid and due audit. In short, beginning December 1, 2005, the Veteran was incorrectly paid compensation benefits of $145 a month instead of $112 a month due to his incarceration. As such, this left an overpayment amount of $363 ($1,595 minus $1,232) for the time period between December 1, 2005 to October 31, 2006. In a November 2006 Debt Management Center (DMC) letter to the Veteran, he was notified of the amount of this overpayment ($363). The VA noted that it planned to recoup this overpayment by withholding compensation benefits beginning in February 2007. The Veteran has not disagreed with the amount of the overpayment - $363, which was confirmed by the December 2008 written paid and due audit. However, he has challenged the validity of the debt, which is a creation issue. He argues that it is not his fault VA paid him $145 a month instead of $112 a month from December 1, 2005 to October 31, 2006. He believes it is not fair that VA informed him of the overpayment in an October 2006 decision, 10 months after VA commenced with the improper payments. He also added that recoupment of the overpayment by VA would add to the tremendous strain he and his spouse have had to endure because of his incarceration. In essence, the Veteran is asserting that the overpayment was the result of sole administrative error by VA and is therefore invalid. See October 2008 statement. If it is determined that any or all of the overpayment at issue was improperly created, award action should be taken to rectify the error. It is clear from the evidence of record that the Veteran was not legally entitled to the benefits in question of $145 a month. That is, effective December 1, 2005, due to periodic legislative changes, the Veteran was instead entitled to benefits of $112 a month, which is the 10 percent rate of compensation payable for incarcerated Veterans under 38 U.S.C.A. § 1114 (a) (West 2002 & Supp. 2006). See also 38 C.F.R. § 3.665 (a), (d) (2006). In view of this statute and regulation, the Veteran was not legally entitled to receive compensation benefits of $145 a month from December 1, 2005 to October 31, 2006. Yet, the VA still awarded the Veteran this improper amount during this time period. Since the Veteran had no legal entitlement to compensation benefits of $145 a month from December 1, 2005 to October 31, 2006, then in order to substantiate the Veteran's claim that the overpayment was not properly created, it must be demonstrated that VA was solely responsible for the Veteran being erroneously paid such benefits. Upon review of the evidence of record, the Board finds that the overpayment was created solely as a result of VA administrative error and it cannot, therefore, be held to have been properly created. As early as July 2006, the VA sent the Veteran a letter advising that his rate of compensation should be $112 a month from December 1, 2005. Yet, the VA continued to make erroneous payments of $145 a month. In fact, in the September 2008 SOC, the VA noted that the award of $145 a month was the result of an incorrect "manual change" by a VA employee. As such, this overpayment was the result of VA administrative error. In order for the overpayment to be considered the result of sole administrative error, and for the Veteran to consequently not be liable for the debt, the Veteran must not have known, or should have known, that the payments were erroneous. In this regard, the Veteran was informed by VA of the overpayment in an October 2006 decision, 10 months after the VA began to make the improper payments. The Veteran is not responsible for keeping up to date with VA's various periodic legislative changes pertaining to payment amounts. The Veteran clearly was unaware that the payments of $145 a month were erroneous. In fact, he did not receive any formal notice of the overpayment from the VA until October 2006, subsequent to all payments being made. The evidence of record does not demonstrate that the Veteran had knowledge that he was receiving benefits to which he was not entitled or that he otherwise acted or failed to act in such a way as to perpetuate the error. Accordingly, the Board finds that the overpayment was solely the result of VA administrative error, and that the debt in the amount of $363 therefore was not properly created and cannot legally be charged to the Veteran. Erickson v. West, 13 Vet. App. 495 (2000) (holding that when an overpayment has been made by reason of an erroneous award based solely on administrative error, the reduction of that award cannot be made retroactive to form an overpayment debt owed to VA from the recipient of the erroneous award). In view of the finding that the overpayment resulted solely as a result of VA administrative error, the Board finds that the RO's decision to attempt to recover the $363 was improper and that the debt is not a valid debt to VA. 38 U.S.C.A. § 5112 (b) (9), (10) (West 2002 & Supp. 2009); 38 C.F.R. § 3.500 (b)(2) (2009); Jordan v. Brown, 10 Vet. App. 171 (1997). The Board acknowledges that in a November 2006 DMC letter to the Veteran, the VA noted that it planned to recoup the $363 overpayment by withholding benefits beginning in February 2007. If that is the case, it is feasible that some of the overpayment debt may have already been recovered by VA. However, in accordance with Franklin v. Brown, 5 Vet. App. 190, 193 (1993), the Board will consider waiver of the entire overpayment. Since the Board has determined that the overpayment was not properly created and that the debt was not valid, any amount already recouped by VA will be returned to the claimant. See Franklin, supra. On a final note, the Board sees that in the September 2008 SOC, the RO briefly addressed the separate issue of the validity of the debt for compensation benefits improperly withheld from May 30, 2005 to July 11, 2005 due to confusion regarding the Veteran's actual incarceration date. This issue was referred for possible readjudication to reflect the correct date of incarceration, and apportionment of benefits to the Veteran's spouse. However, in a January 2009 administrative decision, the RO determined that from May 30, 2005 to July 11, 2005, the overpayment of apportionment benefits of $1,105.63 to the Veteran's spouse was due to VA administrative error in the miscalculation of the Veteran's incarceration date. Therefore, the apportionment award of the Veteran's spouse was not reduced for the time period from May 30, 2005 to July 11, 2005. The RO also noted that the Veteran's compensation benefits had been favorably changed to reflect withholdings beginning his 61st day of incarceration - July 11, 2005. In summary, these particular validity issues related to the Veteran's incarceration date have already been resolved in the Veteran and his spouse's favor. They are not before the Board at this time. ORDER The overpayment in compensation benefits of $363 was not properly created and is not a valid debt, such that the Veteran's recovery of that sum is granted. ____________________________________________ A. BRYANT Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs